Guide to buy a home without land troubles

Demand for all the legal documents and know the builders past history before buying a property

How many of us actually know the history of a land before buying it? Not many of us pay attention to such issues and consider it to be timeworn and carry on with the buying procedure. May people land up in trouble and are aware about the controversial land issues only after its purchase and construction on it. Most of them are lured with lower property rates and buy them immediately without knowing the land history. With the advancement of properties in India, there are many issues like, the localities or the farmers in the city are deprived of their land only to build enormous projects on them, which are apparently sold to property buyers. Down the years, when the farmers or the localities approach the court demanding their land, naturally the property buyer lands up in trouble. In such cases, there are various precautionary measures which a property buyer should take before buying a land.

The important documents to be demanded before buying a property are;

The sale deed:

This is also known as the conveyance deed and is the key document through which a person transfers his rights on the property to the buyer, who then acquires absolute ownership. The title deed: This document states the details of the ownership, rights, obligations and mortgages on the property. Defaulting title deeds of a property are usually refused by the banks while financing the property.

The leasehold:

 This is a document for a property which has been leased for a specific period of about 99 years, from an owner with a freehold right on the property. The lease can be transferred only with the permission of the lessor.

The freehold:

This states the absolute ownership of the owner on a property stating that he has a complete control of the land and the buildings on it. It is advisable that a buyer should go for a property with a freehold right from a seller.

The mutation:

This is the entry of the transfer of property title in revenue records of a municipal body. This document is used while paying taxes and does not provide a legal title to the person.

The encumbrance certificate:

This certificate is an important document for property transactions. It is also issued for the purpose of mortgaging a property to avail a loan. It certifies that the property is not already mortgaged.

The power of attorney:

This is the legal contract which gives the holder a right to maintain, rent, lease, mortgage or sell the property. On the other hand, the individual holding the power of attorney does not possess the ownership rights on the property.

In case of a land with legal issues, a property buyer faces problems like;

• The buyer might either lose his home or will be given another home which is not necessarily chosen by him as compensation.
• The buyer will be refunded with the amount which apparently gives him no time to search another home.
• In case if the buyer is refunded with the amount, he/she will be at a greater loss as he would have paid higher interest to the builder than the appropriate interest.
• Also the higher property prices will not allow the buyers to choose their desired property in case of home compensation.

Important features a buyer should focus on before investing in any property:

• Before buying any property a buyer should focus on the general aspects like the property price, the reason behind the increase and decrease of the property price, the area, the number of rooms, the location and the possession date. Apart from just these basic things, a buyer should also focus on the finances of the builder and legal clearances of the land/project.
• The buyer should do a detailed research on the liquidity, the property prices and the interest rates along with the global economy and the domestic equity. The buyer should do a financial health-check of the developers and their projects before investing on any land.
• The reputation of the builder is another important aspect while buying a property. Most buyers are attracted towards properties under construction rather than the ready-to- move in apartments as they are quite affordable and have flexible payment options. On the other hand, the risks are also higher as the entire process depends on the builder’s resources and efficiency. The buyer should check the developer’s delivery record. Consider factors like the lack of transparency and the past performance from the builder. Other important factors like the status of the land title, current market price of a developer, internet research, enquiries with local brokers and customers and the price breakup should be considered.

• The financial standing of the builder is another important aspect. Most of the builder’s financial standing details are very rarely found, it is important that these details should be verified. Look for builders with a strong cash flow and easy execution of projects.
• The buyer should check the aspects like if the project is funded by the bank or all the approvals are in place.
• The real estate rating is another important aspect to be considered by the buyer. This provides the key information about projects in a standardised manner. It is the only independent rating of developers and is very useful. The ratings are based on quality of documentation, construction-related risks, financial flexibility/viability and the track record of the builder. The ratings are done through many types of software and indicate the quality of the project. The ratings of a property are useful for the builders, developers and the lenders.
• The legal verifications of all the important documents is another important procedure which should be done by the buyer. Documents like the title papers, construction certificate, clearances from municipal authorities and latest tax receipts should be checked. The land title should be clear and validated along with the registration of the land and the development rights of transfer. The buyer should also verify the last four-five transactions and the pre launched booking should be carried out only after the land is registered.

• The buyer should demand for the encumbrance certificate for old properties. This document will state all the transactions related to a property; the sale, lease, mortgage, gift, partition or release. The buyer should check if the land is financed well as the financial institutions do the necessary due diligence before clearing loans.
• Hire a lawyer to check the authenticity of all the documents and check the property registered and maintaining up-to-date record aspects. Also focus on the registration of the undivided share (UDS) of land as the registration of ownership is important.
• The buyer should apply to the urban development authority for a zonal certificate to ensure that the property he plans to purchase is in the residential zone. Also the buyer should get an endorsement order in case of an agricultural land.
• The buyer should demand for a breakup price and should be aware of the different payment schemes. Also the builder should check clauses related to cost escalation and penalty for delayed payments to avoid trouble.

Lastly, the buyer should seek confirmation from the builder on the fixtures used with a detailed description of the quality (brands, models) of materials to be used.