Factors To Consider Before Buying A Plot

Eyeing healthy returns on investment? It has been a well-known fact that plots score better over other property types in terms of returns. Thus, if you can manage to strike a good or rather ‘safe’ deal, buying a plot can be a rewarding purchase considering that rising property prices.

But before you finally take that bold step in high heels, there are some vital factors to be considered to ensure that you are dealing with the right seller and investing in a plot approved by the town planning department or the concerned authority.

Key factors you must check before buying a plot

• Location: It is important that you determine the location of the plot by considering its proximity to the important areas within the city. Do not get lured by less priced land in faraway areas with least development.
• Check the real value of land: Rather than blindly rushing in to buy a plot that seems cheaper to you, it is advisable that you do your research well and consult a real estate expert to determine the value of the plot/land.  After all the initial checks, you must negotiate well with the seller on the piece of land.
• Size of the Plot/land: If you are looking to buy plot of land for living purpose at a later stage, it is advisable to first understand your requirement. Ensure that you check on how much land (built-up-area) you will need to build your dream home. Topography and soil are another two vital factors to consider while buying the plot.
• Verify the builder: One may often hear that ‘the piece of land is under litigation’ or some other issues. Hence, it is recommended that you do a cross-verification of the seller (in many cases it is the builder). You could possibly verify the past or current projects (plots) of the concerned builder or even post your queries on the online real estate forums. This will give you some idea about the builder credibility and reliability.

Don’t Get Cheated!

• Verify Title Deed: Check whether the seller has a right over the property. The first step is to see the title deed of the land which you are going to buy. Confirm whether the land is in the name of the seller and that the full right to sell the land lies with him and no other person. It is always better to get the original deed examined by a reputed lawyer.

• Check Encumbrance Certificate: Before buying a plot, it is important to confirm that the land is free from legal dues. For this, check Encumbrance Certificate for at least 30 years. Given at the Sub-registrar’s office, this states that the said land does not have any legal dues and complaints.

• Necessary Approvals by Local Body: Verify whether the plot or the entire layout has been approved by the City Development Corporation and the local body. For instance, in Bangalore the key authorities are BBMP and BDA. Ask for the necessary approval documents and if possible get it verified by a lawyer. In case of a large layout where builder plans to develop the plot, ensure that the planning permission and building approval has been obtained from the City Development Corporation.

• Release Certificate: In some cases, the land may have been pledged to obtain a bank loan. In such a scenario, you will have to get a release certificate from the bank, which ensures that the loan on the land has been completely repaid. But if there are more than one owner, do take the certificate from all the people involved.

• Property Tax Receipts & Bills: To free yourself from any taxation issues, it is recommended that you ask the seller (of plot) for previous property tax receipts that he may have paid along with other bills related to the plot. The receipts will ensure that you don’t have to deal with any taxation-related issues of the seller.

• Verify the land-use: It is very important to verify the land-use zone as per the city master plan for the plot. You can get the city master plan from the local body office in your respective city.

• Do your research: Be sure to research any contingencies, which may hinder the development of the property. For this, you can probably refer to or participate in various online real estate forums and understand or identify any issues in the plot. Determine if the plot has (or is proposed) the necessary infrastructure to build your home. There should also be a deed showing right-of-way, allowing the right to build a public road or accessibility to the land.

Check this while registering your plot

When you have finally selected the land / immovable property to buy, you need to register the same with the authority concerned. Once a property is registered, it means that you, in whose favor the property is registered, are the lawful owner of the premise and is fully responsible for it in all respects. Through registration of Sale deed, a person is able to acquire the rights of the property from the date of execution of the deed.

Loan for Buying a Plot

Banks and financial institutes offer “Land Loan” or “Land Purchase loan”. A land loan is a financing option that is meant to be used just for the purchase of land.

Banks usually insist that the land you are buying, whether it is for your house or for commercial purpose, should be from a development authority or from a society, implying that it should be a legally safe land.

Tax benefits on a Land Loan

One thing that you must remember is that there are no tax sops if you take a loan to buy a plot of land. Normally, lenders will not finance more than 60-70 per cent of the total cost of the plot and the remaining has to come from your sources.

However, if you build a house on that plot of land, you will be eligible for both Land Loan and Home construction loan. Land loan enables you to buy a plot of land and while Home construction loan enables you to construct the home in the plot you purchased.

The tax deductions will be applicable only in the year in which the construction is completed. In that year interest on land loan as well as the construction loan till the end of the previous year shall be taken together and one-fifth of this cumulative interest plus the interest payable for the specific year will be eligible for deduction. The principal repayment you make on your home loan is also eligible for income deduction under Section 80C.